# 42 Chef Gourmet, Inc., has assembled the following data pertaining to its two most popular…

# 42

Chef Gourmet, Inc., has
assembled the following data pertaining to its two most popular
products.

Blender
Food
Processor

  Direct
material

$

24

$

41

  Direct labor

18

31

  Manufacturing
overhead @ $50 per machine hour

50

100

  Cost if purchased
from an outside supplier

66

114

  Annual demand
(units)

26,000

30,000

     Past experience has shown that the
fixed manufacturing overhead component included in the cost per
machine hour averages $36. Management has a policy of filling all
sales orders, even if it means purchasing units from outside
suppliers.

Required:

1.

If 51,000 machine hours are available, and management desires to
follow an optimal strategy, how many units of each product should
the firm manufacture? How many units of each product should be
purchased?

Blender
Food Procesor

Manufacture

Purchase

       

2.

With all other things constant, if management is able to reduce
the direct material for a food processor to $24 per unit, how many
units of each product should be manufactured? Purchased?

       

Blender
Food Processor

Manufacture

Purchase